Brenda Buttner and was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; and Mike Norman, Chief Investment Strategist for getrader.com.
Thousands of U.S. troops are going in to the Mideast as the White House says time is running out for Saddam Hussein. And on top of that, there was the discovery of empty chemical warheads late last week. But does it add up to war in the end?
Tobin’s been saying for a long time that war is coming, but now he thinks Saddam is going to leave Iraq. And when he does leave, the market will jump 500 points.
Mike said Saddam’s heading out, but not because he wants to. He believes that behind the scenes, Saddam’s own military is planning a coup. The reaction of the market will be positive. He thinks this will be an up year for stocks, but not because of the overthrow, but because the economy is improving.
Pat took a different point of view. He thinks that Venezuela is the key. He explained that we have not invaded Iraq because we have been unable to get oil from Venezuela. A strike has oil production shut down there. If an attack on Iraq does occur, he predicts an initial sell-off due to concerns about the damage that may be done to the oil production facilities.
Scott believes that since U.N. inspectors found empty chemical warheads in Iraq, we have reached the point of no return, and Wall Street realized that last week. He feels the market is a little scared right now, but the only way that Saddam is going to leave, is in a body bag.
Gary B. charted the Nasdaq or what he calls the “Mood Ring” for the market. He warned that any time an index rises without hesitation, like the Nasdaq started to do in late December, it’s prone to a pullback. He thinks that the 1,500 level is key for the Nasdaq, because it was unable to break through that level. He said war or no war in the next week or so, the market is going down.
Tobin, Scott and Mike stayed on to pick stocks that will climb when Saddam falls.
Mike said Saddam will go down due to a coup, and ChevronTexaco (CVX) will rally as a result. He thinks oil prices are going down, which is why ChevronTexaco will head higher. He explained that the company is a marketing and refining company, and its main cost is the price of crude oil. When that cost comes down, its profits will go up. Mike said the stock is headed to $80. (It closed on Friday at $68.11.) Toby thinks it’s a little expensive. Scott likes ChevronTexaco but doesn’t think it’ll move much.
Scott said Saddam will be forced out from an invasion and part of Iraq will be destroyed in the process. This means a lot of humanitarian aid will be sent to the area and packaged goods company, ConAgra (CAG) will benefit. He sees the stock heading to the $30-$35 area over the next year. (ConAgra closed at $25.64 on Friday.) Tobin applauded Scott’s pick. Mike wouldn’t buy the stock because agricultural commodity prices are coming down.
Since Toby’s no longer beating the war drums, he thinks Fluor Corporation (FLR) is set up to do well now. Once Saddam leaves Iraq, we will need to boost Iraq’s oil production and Toby thinks Fluor is the company that will be able to do it. The stock closed at $29.40 on Friday, and he predicts it is headed to the $35-$40 level. Scott said it’s a great play on the situation. Mike likes the stock, but said it has already had a big move up, so he doesn’t think it can go much further.
It was time for a little deja vu all over again.
Last week Gary picked his top stocks in the Dow, Nasdaq 100 and S&P 500 for 2003. This week it was Pat’s turn.
Pat picked McDonald’s (MCD) as his favorite Dow stock. (Actually, Home Depot-HD is his top Dow stock, but Gary B. chose that stock last week.) Pat likes Mickey D’s because it is one of the most recognized brands on the planet, one of the largest owners of real estate in the world, and with just minimal improvements, its fair value is way north of the $15 level. But Gary B. said fast food at McDonald's doesn’t mean fast money for investors. Its chart is in terrible shape, in a downtrend, and heading lower. However, if the stock could break through the downtrend it’s been in since September, he’d be a buyer.
Number one in the Nasdaq 100 for Pat: IDEC Pharmaceuticals (IDPH). He selected this biotech company because it actually makes money, has a very clean balance sheet with no net debt, and its cancer drug might be good at treating some other illnesses, like rheumatoid arthritis, asthma, and psoriasis. Assuming their cancer drug continues to sell reasonably well, Pat thinks the stock is worth $50. (IDEC closed on Friday at $35.05.) Gary B. did not like this stock because it has been in a downtrend since May and is currently at a support level. He thinks the stock can easily fall to $15.
And out of the 500 stocks in the S&P 500, Pat likes Automatic Data Processing (ADP) best. He said it is one of two dominant payroll processors in the United States and has plenty of growth potential. Also ADP’s competition is limited, and it’s buying back lots of shares. Pat thinks the stock is headed to $55 (closed at $36.10 on Friday). But Gary B. saw on the charts that the stock just took a nasty tumble. He’d wait for a close in the low 30s before buying.
Tobin: Saddam runs to Syria; market up 10 percent by Easter!
Gary B: Nasdaq drops to 1,000 by year end
Mike: Gold ends the year 20 percent lower from here
Scott: Oracle (ORCL) next to declare useless dividend
Pat: Pfizer (PFE) makes your bottom line 30 percent bigger